CBC in Crisis by Barry Kiefl

Jun 8, 2014

Chasing ad revenues and ratings has proven a losing strategy.

Source: Literary Review of Canada

The CBC is one of Canada’s oldest and most important public institutions. But it is in crisis, made worse by a budget shortfall announced in April. Government funding has been cut and it has lost its most lucrative TV programming, NHL hockey. Undoubtedly, it will survive in some form for decades to come, but what changes are needed to ensure it best serves Canadians?

Decades ago CBC was the only Canadian TV or radio station most Canadians could receive. It was a necessity, not a convenience. A handful of private radio stations existed in major cities in the 1920s; but in the 1930s Parliament created the CBC and rapidly it became the most important radio broadcaster in the country.

During the 1940s and ’50s CBC Radio commanded a dominant audience share, achieving mass audiences for many programs with ratings larger than the most popular TV programs today. U.S. programs were popular and part of the CBC schedule: The Guiding Light had ratings as high as today’s Super Bowl and Lux Theatre had ratings equal to the ratings of all TV stations combined. The 10 o’clock national news had an audience share of 50 percent.

The 1950s was also a golden age for CBC TV because of its near monopoly of the television audience across the country.

By the late 1950s CBC Radio began suffering audience losses, as private popular music stations were launched. Rock ’n’ roll, aided by the invention of the transistor radio and car radios (as well as TV), crushed CBC’s comedy and variety programs. By the late 1960s the audience numbers had so deteriorated that CBC even considered shutting down its radio services.

Then CBC managers made some decisions. They reduced and, by the mid 1970s, got rid of all advertising on radio. And they allowed some of their smart programmers to experiment.

These programmers realized that a large and important audience niche could be served with intelligent, thoughtful and balanced news and information, coupled with substantive cultural programming that revolved around literature, the arts and classical music. They correctly surmised that there were enough Canadians who wanted something more substantive than pop music, traffic reports and jocular hosts, interrupted by commercials.

CBC Radio’s Success

The experiment was so successful that much of that programming still exists on CBC Radio. Today about one in three Canadians regularly listen to CBC Radio, and CBC Radio captures about 15 percent of all radio listening—not what it did in 1950 but still substantial.

Radio listening has declined somewhat in the last decade or so, but the current CBC share means that the average Canadian, including non-listeners, spends about 125 hours per year listening to CBC Radio. Regular listeners spend almost 400 hours of their year listening to CBC.

Think about that—that is as much time as most of us spend at work in any three-month period. CBC Radio is by far the most successful CBC service in numerical terms. By comparison, CBCMusic.ca, the streaming music service, is listened to by the average Canadian for about one hour per year and cbc.ca, the CBC’s news and information website, accounts for only about three hours per year.

Curiously, CBC Radio seems to have forgotten its origins and has once again started to compete with private radio stations, airing pop music on its second radio network and employing a journalistic style that is starting to sound a lot like that of private radio. Commercials have even crept back in.

One explanation for CBC Radio moving away from its well-designed strategy is that CBC has made disproportionate budget cuts to the radio service, weakening the service and prompting some unsavoury changes. More than $60 million has been taken from the annual budget of radio, which in net terms has been given to CBC TV. Radio staff has been cut by 20 percent, while TV has seen cuts of less than 4 percent.These massive budget cuts have worked their way through the radio schedule and listeners now have far more repeat programming, less investigative journalism, less entertainment programming, less local programming and local news that sounds more and more like private radio.

CBC TV’s Conundrum

CBC TV finds itself today in a very fragile position, as desperate as radio’s was 50 years ago. Today CBC TV is only one (two if you count its news channel) of hundreds of channels, with less and less to distinguish it from private channels.

Yes, CBC programs are mostly Canadian and provide employment to Canadian actors, writers and journalists, etc., but most programs look and sound like what one would find on any other channel. Some of the programs and personalities on CBC TV are indeed from other channels, including its biggest hit, Murdoch Mysteries, which is produced by Shaftesbury Films and ran for five seasons on CITY TV before being picked up by CBC.

CBC airs many of the same programs one finds on private channels: Hollywood movies, NHL hockey, the Olympics, news and information that increasingly mimic the style of private TV, and, until recently, daily U.S. game shows. Most importantly, virtually all the same commercials that are aired on private TV also appear on CBC.

CBC TV does have an audience reach much larger than CBC Radio. About four in five Canadians are regular viewers; but, according to CBC, CBC’s share of total viewing time is now on average about 5 percent. That is a tiny fraction of what it was in the 1960s or even the 1970s and ’80s. There are parts of the day and seasons of the year when the audience share is 3 to 4 percent.

A large number of Canadians find something worth watching occasionally on CBC. But few are loyal to the service. The average Canadian spends only about 70 hours per year watching CBC TV, including NHL hockey and foreign programs. Remove those programs and the number is only about 35 hours per year.

CBC TV chose a different path from radio. Rather than creating a strategy to serve a substantial niche with intelligent journalism and entertainment, CBC TV strove to be more popular and to attract a mass audience as well as advertising revenue.

This happened gradually over decades, but accelerated when government began reducing CBC funding in the 1980s and peaked in the early 2000s, as detailed in Richard Stursberg’s book, The Tower of Babble: Sins, Secrets and Successes Inside the CBC. Stursberg described the strategy to grow audiences and ad revenues: “It provided an alternative to endless lamentation about the inadequacy of government funding. Our plan, then, was to save ourselves.” He claimed that CBC TV ratings on his watch were the highest in history, but this was far from the truth. In fact, according to CBC documents, just before Stursberg took control of CBC TV its prime-time audience share was 10 percent and never reached that level during his tenure. As noted above, CBC Radio once had a dominant share of the radio audience but Stursberg also claimed incorrectly that his radio audiences were the highest in the 75 years of CBC radio.

Ads or No Ads?

Despite the success of a non-commercial radio strategy, CBC executives convinced themselves that commercials would do no harm on TV. I recall one program manager being proud of commercials because it made programs look professional, like the U.S. commercial networks with their high ratings. CBC president Hubert Lacroix echoed these sentiments in a speech in 2008: “to be honest, we actually like the discipline these ratings impose on us, because it helps us ensure that we’re delivering the services and programming Canadians want.”

Current management even hired a consultant to undertake a flawed analysis to prove that commercials do not detract from public broadcasting. The analysis went so far as to claim it would be poor public policy to remove commercials. Veteran public broadcasters reject such an analysis on the understanding that running commercials means that you are treating the audience as consumers rather than viewers or listeners. The BBC, a much healthier public broadcaster than the CBC, made the thoughtful decision to broadcast the 2012 summer London Olympics without ads.

The problem is more than a philosophical one: CBC TV’s revenue-driven strategy never delivered on the mass audience that was needed to sell to advertisers. CBC ad revenues in absolute dollars are less today than they were 15 years ago. In 1997–98 CBC English TV ad revenues were $248 million and in 2012–13 revenues were $200 million.In 2014–15 CBC TV will derive no money from ads on NHL hockey and its ad revenue overall will fall to barely $100 million. CBC TV spends almost that much on its sales department and promotion. By comparison, CTV derives over $750 million annually in ad revenue. Global TV generates over $400 million.

The ad revenue of CBC’s news channel is even more meagre, only about $15 million annually. Subscribers to the channel pay the CBC over $65 million annually via their cable bill, yet must still endure commercials. Some ads require people to call a 1-800 number for the CBC to make any money. What effect does this have on the public image of CBC and its journalism?

The kind of ad revenue CBC TV dreamed of can only be achieved with programs with regular audiences of 1.5–3 million viewers, with large numbers of adults aged 25 to 54, the only demographic that interests most advertisers. That is the audience CTV and Global are able to tap with big budget U.S. programs.

The only CBC programming that achieves that kind of audience is NHL hockey. But CBC has been paying so much for rights that it has managed to lose money on hockey in recent years. The corporation became so desperate that one report suggested it was willing to go ever deeper into the red to keep the NHL and even had Gary Bettman, commissioner of the NHL, attend a board of directors meeting in spring 2013. Fortunately Rogers saved the CBC from this folly and paid $5.2 billion to corner NHL rights for the next twelve years.

Here is the paradox: even though government money has been tighter, CBC TV has become far more dependent on taxpayers in the past 15 years. As mentioned, in 1997–98 ad revenue of CBC English TV was $248 million; that same year government funding was $301 million, according to CRTC documents. So ad revenue contributed almost 50 percent of the budget. Today CBC TV ad revenues are $200 million, while the government contributes almost $450 million for the operation of CBC English TV. Advertising now accounts for only about 30 percent of the total. Soon it will be less than 20 percent. In other words, in financial terms CBC TV has become more of a public broadcaster but, despite diminishing returns, expends more and more effort pursuing ad revenues. By 2014–15 when TV ad revenues fall to about $100 million, surely the time will have come to de-commercialize completely. Unfortunately, even after the April 2014 announcement of budget cuts, CBC still seems to be clinging to the hope that ad revenues will be its salvation.

CBC Abandons Public Broadcasting ­Principles?

While chasing elusive ratings, CBC TV and, to a lesser extent, CBC Radio have been distancing themselves from the basic principles of public broadcasting. For example, CBC TV and Radio have journalistic policies dealing with the expression of opinion. The policy states: “CBC journalists do not express their own personal opinion because it affects the perception of impartiality and could affect an open and honest exploration of an issue.”

Yet Rex Murphy, one of CBC’s best-known broadcasters, offered a regular opinion segment on The National, with no reference to its being commentary or opinion, implying that the well-known pundit represented not himself but CBC. An inquiry to CBC in December 2013 solicited this response: “We make a point of labelling his analyses as ‘Point of View’ so there is no confusion among the ­audience.” But that was not the case: Murphy’s segment ceased being labelled “Point of View” five years ago and nobody seems to have noticed. When this was brought to CBC’s attention, the “Point of View” label was reintroduced and an apology was issued.

Another small but telling example of CBC veering from its own journalistic policies is the case of opinion polls. During the 1980s senior management grew concerned about journalists designing and reporting on polls and the possible effect of polls on elections and referendums. A policy was created to ensure oversight by the CBC research department and reporting standards dealing with survey methodology were established.

The policy on polling appears to have been jettisoned by both CBC Radio and TV. Programs such as The House, The National, Day 6, Power and Politics and regular newscasts present poll results with little and sometimes no reference to methodology. Online surveys are another case in point. They are being used virtually every day by CBC programs in ways contrary to CBC policy.

Online surveys are not representative of the general population, but all these shows present their polls as if they are legitimate and scientifically calibrated expressions of Canadian public opinion.

CBC has taken to Twitter in a major way, incorporating tweets into many programs from anyone who takes 30 seconds to compose a 140-character thought. Twitter users are similar to those who respond to radio call-in shows and who answer online surveys in that they are representative of neither the audience nor the Canadian population. And Twitter, used improperly, risks undermining the journalistic reputation of CBC journalists.

Weakening the brand in the pursuit of ratings has clearly not worked and the desire for the mass audience has gone unfulfilled. The desperation seems to have seeped into flagship programs such as The National, which in the 1980s appeared regularly in the top-rated national programs. Not so today. Commercials now appear during the program, inviting viewers to switch channels.

A few years ago CBC hired Frank N. Magid Associates, a firm of American news “doctors,” the same ones responsible for the Eyewitness News format on American television. They are the reason we see Peter Mansbridge standing up delivering his scripts, supposedly to impart a sense of urgency to the news. Perhaps surprisingly, in spite of all this tinkering, surveys reveal CBC national news is still held in high regard by Canadians. But for how long?

How Did This Happen?

CBC has seen government funding, which is still substantial, reduced in relative terms over the past 30 years, and management is desperate for financial solutions to maintain the status quo.

Management and unions can be blamed to some extent for not accepting that smaller budgets should translate into a more focused CBC, perhaps with fewer full-time staff. According to CRTC data, the number of full-time staff at CBC, about 9,000, has not changed much since the late 1990s. The BBC has a budget five times larger than the CBC’s but only about 20,000 full-time staff.

Head office (that is, the president and board of directors, based in Ottawa) can also be singled out for not implementing modern management information systems. Since about 1999 the head office role of developing and implementing policy and corporate strategy has been curtailed and reduced to defending the corporation from real or perceived outside “threats” from the private sector.

This was mostly the result of a decentralized management structure introduced in the late 1990s. A new president, Robert Rabinovitch, gave control of all radio and TV, in English and French respectively, to two executives, who basically acted as the joint presidents. The head office position of executive vice-president, traditionally filled by a veteran broadcaster, was eliminated. Since the CBC president is appointed by the prime minister and is usually someone lacking first-hand experience in broadcasting, the position of the executive vice-president had been critical. In the past 50 years only one president, Tony Manera, has come from within CBC.

The new decentralized structure gave the network heads in Toronto and Montreal ultimate control of both radio and TV. Previously radio had its own vice-president, reporting directly to head office. This change largely explains why CBC Radio budgets have been cut in recent years, while TV budgets have been maintained: the same executive now controls both.

Decentralization could have worked if the networks had been totally responsible and accountable for decision making. However, that would have required a separation of the English and French networks, with head office acting as a holding company. But Rabinovitch did not go that far.

The dysfunctional organizational structure means the networks have greater responsibility but head office remains accountable for their decisions and depends on them for timely and accurate information about audience performance, revenue, expenses, and so on. But things can easily go wrong. For example, head office has gone on record stating that commercial revenue, including advertising, accounted for “one third” of CBC’s total budget; on another occasion it was “close to 40%”; and on a third occasion it was “almost half.” The difference between one third and almost half is about $300 million. Another example: earlier it was shown that ad revenue currently accounts for about 30 percent of CBC TV’s total revenue, substantially less than 15 years ago, yet the president claimed in a recent speech that it was between “40% and 50%,” numbers that presumably came from the TV networks. These conflicting statements are meant to set the record straight. They do anything but, and demonstrate that head office can be kept in the dark.

The English and French networks are content to develop their strategies in isolation and then seek final approval from the president and the board. Sometimes they do not even seek approval. For example, Montreal came up with the ludicrous idea of removing “Radio Canada” from “Ici Radio Canada” and I understand that the president learned about it at the same time the rest of us did.

The networks now determine strategy with far less input from head office. For example, the networks have put much emphasis on new digital services such as cbc.ca, CBCMusic.ca and a digital radio station in Hamilton (accessible only via the internet). As noted above, Canadians spend very little time with these digital services, including ones that have been around for a decade or longer, such as cbc.ca. This is primarily because the competition for the audience in the digital world is exponentially greater than in the world of radio and TV.CBC acts as though the days of TV and radio broadcasting are numbered. But traditional TV and radio are not going to disappear any time soon. TV viewing levels have not been affected at all by the new media and radio listening levels have declined only marginally.

CBC needs to experiment with new technology and internet-based services, which will continue to grow in importance. But oversight from head office that once kept resources spent on new technologies in proper balance is lacking.

CBC’s Future

Many Canadians still cherish the CBC and support the idea of public broadcasting.

A public broadcaster by definition is paid for by all citizens, either through a licence fee or via grants from general taxation. Citizens can choose not to watch or listen, as they may choose not to use libraries, but everyone pays for the public broadcaster and at some point in their lives will probably benefit from the service, as they will likely at some point benefit from our healthcare system. Public broadcasters serve the audience, while private broadcasters sell the audience.

CBC depends on annual grants from Parliament. Canada would be better served with an annual licence fee or a dedicated communications tax. Either would provide for more direct input from citizens, greater independence from government, and less or no reliance on commercial revenue. This was proposed to the Senate committee examining CBC, and now is the time for the government to act.

A new funding mechanism would not only provide for stable year-to-year funding, but it could also increase the amount of funding available for programming to both CBC and private Canadian broadcasters.

What kind of programming? CBC Radio could reinstate the well-thought-out strategy that worked for almost 50 years, and cease competing for advertising revenue and audiences with pop music. Both CBC Radio and TV could return to the journalistic standards that have built CBC’s ­reputation.

Most crucially, CBC TV could finally get off the ratings treadmill. Free of the commercial albatross, programmers could be more creative. CBC would be surprised how many Canadians crave intelligent, substantive news and current affairs and distinctive, edgy, experimental drama and entertainment.

Supporters of the status quo have always labelled this kind of plan as turning CBC TV into “PBS North.” They point to the fact that PBS’s most successful programs are often British imports. While such programs might have a small place in the new CBC TV, most of the schedule would be devoted to innovative Canadian programming that would not cater to commercial imperatives. Programs made for viewers rather than advertisers, which explains why HBO is so successful. I suspect that with intelligent and substantive programming, CBC TV might reach a somewhat smaller number of Canadians on a regular basis. But the audience viewing share might actually increase; the average viewer would spend more time watching such a service and be far more supportive of CBC TV.

If politicians cannot be convinced about a new funding mechanism, at minimum they should establish a CBC trust, modelled on the BBC, which would increase public accountability and perhaps raise additional funds for the CBC. With or without new funding, CBC TV faces a crisis and must find a new audience strategy, one built on high programming and journalistic standards, serving a substantial segment of the population and valued by enough Canadians to justify the expenditure of public money.